of 25 per cent ownership in only four companies on the JSE. Similarly, whereas in 1990 Old Mutual had a controlling stake in seventy-four JSE-listed companies, by 2008 it had stakes exceeding 25 per cent in only two companies (Nedbank and Mutual & Federal). Yet the most remarkable transformation took place at Anglo-American. In 1992, Anglo controlled some eighty-six JSE-listed companies which had interests across the economy, yet by 2008 it had become a more focused miner with holdings of more than 25 per cent in only four JSE companies: AngloGold Ashanti, AngloPlatinum, Kumba and Tongaat Hulett (McGregor et al 2009).
Unbundling was accompanied by rapid internationalisation. Major South African corporations had invested overseas even under apartheid (through both legal and illegal means), yet they had faced myriad restrictions and controls in doing so. From 1994, however, the situation eased considerably, notably by the scrapping of the Financial Rand, the grant by government of exchange control exemptions to major corporations, and a reduction in controls on the outward flow of capital. Most particularly, from 1997, the government granted permission for some of the largest South African companies – notably Billiton, South African Breweries, Anglo-American, Old Mutual and Liberty Life – to move their primary listings from the JSE to London, thereby facilitating their evolution into major multinationals. This development was accompanied by a massive outflow of South African investment capital (McGregor et al 2009). In short, the transition provided the conditions under which significant segments of domestic capital could exit South Africa and foreign capital would come in, facilitated by Johannesburg’s rapidly moving to become the continent’s primary financial centre for global capital..
Much has been made of the extent to which South African capital has moved into the wider continent since the early 1990s, and indeed this is remarkable, not least because it has been a movement which has been so broad-based, across virtually every sector of industry, and because South Africa has become the foremost source of new foreign investment in Africa. Even so, in 2006, Africa absorbed only 6.4 per cent of South Africa’s outward foreign investment, compared to Europe which took 66 per cent (R82.45bn) and the Americas 24 per cent (R29.62bn) respectively (Daniel and Bhengu 2009: 142). However, whilst domestic capital has moved out, foreign investors have moved in to purchase assets from the unbundling conglomerates: for instance, Toyota, First Bowring and SA Motor Corporation from Anglo, Trek Petroleum and Mobil Oil, Carlton Paper and Gencor (now BHP Billiton) and Blue Circle from Sanlam. Yet the group that has gained most from these unbundlings is composed of anonymous investors represented by institutional investors guided by fund managers. Indeed, by the end of 2007, foreign shareholders held 45 per cent of the JSE’s issued shares, up from just 18.9 per cent a year earlier (Hasenfus 2009).
Overall, these various developments add up to the massively increased exposure of the economy to global market ‘sentiment’. As argued by Adam et al (1997: 162–3):
‘Defiance of global expectations that was possible with the relatively isolated semi-colonial outpost in 1948 is now immediately penalised by currency fluctuations, higher interest rates on loans or capital outflows and refusal of investments ... the ANC has to prove constantly that it is worthy of outside support ...’
To be fair, South Africa avoided the immediate effects of the financial meltdown which afflicted the global economy, most noticeably in the West, from 2008. A fortuitous combination of the apartheid legacy of control and post-apartheid macroeconomic stringency had ensured that the financial sector had remained quite tightly regulated. Hence the excesses of deregulation and over-lending that brought many major financial institutions to their knees in the West were not repeated in South Africa. No banks collapsed. Unlike what happened in the United States, the United Kingdom and elsewhere, the financial sector received no sudden and major injection of public money to stave off a downward spiral. Nonetheless, as Mohamed indicates, South Africa has become dramatically exposed to international currency flows, as ‘hot money’ moves in or out of the economy. Rapid outflows of foreign currency (as in 2001) lead to depreciation of the rand against major global currencies, a rise in inflation, and hikes in interest rates; returning inflows of currency (as during 2004–2006) raise the value of the rand internationally, knock exports, increase imports and lead to current account deficits and balance of payments difficulties. In short, South Africa’s increased global exposure has made government policy become increasingly responsive to the short-term demands of what Trevor Manuel once termed the ‘amorphous market’ rather than being able to pursue long-term strategies of development. This is in considerable part because internationalisation and financialisation have tended to reinforce the commodity basis of the economy.
Reinforcing the minerals-energy complex
South Africa’s economic trajectory from the late nineteenth century saw a shift away from an agrarian to a minerals-exporting country. Even though the expansion of mining stimulated wider industrialisation from the beginning of this transformation; even though from the 1920s onwards, nationalist governments implemented protective strategies which encouraged manufacturing; and even though by the 1960s the major mining houses had moved beyond their base in gold, diamonds, coal or whatever to become huge conglomerates spanning finance and industry as well as minerals, the economy remained dominated by what Fine and Rustomjee (1996) have identified as the minerals-energy complex (MEC). To be sure, the direct contribution of mining to GDP declined from 12.1 per cent in 1951 to 9.5 per cent in 2008. In contrast, that of manufacturing remained static (18.1 per cent in 1951 to 18.8 per cent in 2008), whilst that of finance grew from 9.3 per cent to 21.7 per cent (SAIRR 2008–09: 139). Nonetheless, although South African industry has achieved considerable capacity and success, the economy continues to bear the heavy imprint of the MEC. Most importantly, broad sectors of manufacturing, energy supply, construction and transport remain intimately connected with, if not dependent upon, mining and servicing its needs: ‘technical linkages between the two broad sectors have been significant and account for a substantial proportion of non-MEC manufacturing’ (Fine and Rustomjee 1996: 245). Further, as Nattrass (1981: 269) remarked nearly three decades ago, ‘South Africa remains heavily dependent upon the successful export of relatively few items and the composition of her exports largely reflects her natural resource endowment’. By 1990, manufacturing accounted for 80.2 per cent of exports and 96.7 per cent of imports, while mining accounted for 15.3 per cent of exports and just 1.64 per cent of imports. However, by 2008, manufacturing accounted for only 58.3 per cent of exports and 78.2 per cent of imports, while mining accounted for 37.9 per cent of exports and 20.3 per cent of imports (the latter figure obviously including oil) (SAIRR 2008/09: 139). Suffice it to say here that globalisation would seem to have enhanced South Africa’s dependence upon the MEC rather than encouraged a wider diversification of the economy. This might not matter so much except that the long-term trend is for the MEC to become increasingly capital intensive and to provide declining opportunities for employment.
Meanwhile, the liberalisation of the economy may well have intensified dependence upon foreign knowledge production rather than advancing it domestically, for the internationalisation of South African industry has probably rendered it more feasible for firms to draw on knowledge and research from global supply chains (which may themselves often be embedded in multinational company structures) (Lorentzon 2006: 195). While there is nothing wrong with exploiting foreign sources of knowledge, there is plenty wrong if this is not built upon by a concerted national system for industrial innovation. Such a system in South Africa remains in its infancy, due in considerable part, according to some authors, to the country’s lack of an integrated industrial policy (Morris et al 2006).
Employment, unemployment and inequality
